Delivering results through claims technologies How well insurers are prioritizing investment in claims technology Contents Foreword 2 Executive summary What’s driving change in claims management Spotlight on: Keeping up with changing customer expectations 13 Technology investment priorities 18 Spotlight on: Working effectively with third party suppliers 25 Approaches to investment in claims technology 28 Realizing the benefits of new technology 34 Spotlight on: Supporting claims handlers with technology 40 Conclusion 42 Ernst & Young — a leading advisor in claims management 44 Contacts 45 Delivering results through claims technologies How well insurers are prioritizing investment in claims technology Foreword In recent years, a new generation of technologies have created a renewed appetite for IT-enabled claims transformation Yet there are still a large number of challenges to be overcome in delivering the anticipated business benefits So how well are insurers achieving improved claims performance through their investments in claims technologies, and where should they focus to see greater success? It is widely recognized in the industry that achieving a seamless claims experience is a major issue for insurers The challenges for claims professionals across Europe are exacerbated by the sheer number and diversity of issues that impact upon their operations In the current cost-constrained climate, achieving operational efficiencies, while meeting customer expectations in a regulatorycompliant manner, is keeping claims leadership occupied Claims leakage also continues to prove a challenge — particularly the battle against fraudulent activity High-profile factors, such as the natural catastrophes of recent years and the associated volatility in claims volumes have also served to bring the vital role of claims management into sharp relief If these operational benefits can be realized, coupled with demonstrable bottom-line impact of “seamless claims” there is a strong case for increasing investment — especially in technology Based on interviews with senior claims and IT leaders in five European countries, this report shines a spotlight on some areas where insurers need to invest to see improvements This report helps to identify key trends in investment priorities, the barriers to change and how to realize the benefits of technology investment We trust you will find this informative Andreas Freiling EMEIA Insurance Sector Leader Ernst & Young GmbH Delivering results through claims technologies How well insurers are prioritizing investment in claims technology Executive summary Ask most insurers to identify the current drivers of change for claims management and they will give you a diverse list that will include anything from combating fraudsters to complying with wave after wave of regulation A common and persistent theme, however, is that of the customer journey: the need to meet evolving customer requirements is very much at the forefront of many of the changes taking place across Europe This can be at odds with the equally pressing need to maximize profitability and keep costs down However, there are areas in which the demands of the customer and the bottom line are aligned This is particularly true when it comes to the speedy settlement of claims, which is commonly cited as a priority for customers, but which also translates into lower costs for the insurer It is this ability of claims management to reduce costs that has ensured that — despite the uncertain economic environment — insurers are not standing still when it comes to investing in technology There is currently much activity across Europe in terms of changes to and investment in claims management, and there is widespread confidence among claims leaders that the insurance industry as a whole is investing sufficiently in IT to improve the speed, efficiency and accuracy of claims handling There is also a high level of consensus among insurers that teams of skilled claims handlers need to be supported by efficient and up-to-date claims management technology Insurers appear keener than ever to invest in this technology, with claims leaders looking to maximize the benefits of new software and solutions But with the ever-present need to demonstrate a return on all investment, the question remains of where best to focus resources Key findings from the research include: Customer expectations are evolving, but this is not necessarily translating into investment in customer-centric claims management technology Of those surveyed, 40% pointed to “customer expectations of speed and efficiency” as one of the main factors driving change in claims management across the insurance industry, and increased customer satisfaction is considered a top three driver when investing in claims management technology Yet customer and claimant management was only selected by one quarter of respondents as an area of claims operations they are currently prioritizing for change, and less than one-fifth of respondents are investing in tools to assist with interaction with customers Being prepared to interact with customers through a variety of channels will be vital, as the survey shows a strong increase in customer expectations of using mobile devices and social media to interact during the claims process over the next five years, as well as wanting face to face interaction The shift in how insurers are approaching investment in claims technology is resulting in an increased demand for specific skills and resources Historically, building a bespoke system has been a more common approach but, over the next three years, insurers are more likely to buy a technology tool and adapt it or enhance or replatform an existing system This is particularly true of respondents whose organizations have undertaken a large-scale IT claims initiative in the past three years Of the respondents who have, in the past, built one only 6% still plan to build a bespoke system in the next three years Yet, despite this shift, around in 10 insurers still say they are recruiting to bring new skills in-house to support their development plans This disconnect is particularly marked in the UK, with 60% of respondents saying they are recruiting new skills in-house, despite only 5% planning to build a bespoke system This continued need for in-house skills may be explained by the level of customization insurers plan for the off-the-shelf tools they are buying, or the fact that they previously outsourced much of their technology development Insurers recognize the need for better data management but are not yet prioritizing this in the implementation of claims management technologies Survey respondents say that “better data management” is the change that would most increase the efficiency and effectiveness of their claims processing function and improvement in capturing claims data is a top five driver when investing in new claims processing technology Reporting and analytics software are the top technology solutions insurers are considering to address issues faced in claims processing However, it is interesting to look at the issues of improvement in capturing claims data and generating better management information These are more important drivers when investing in new claims processing technology for those respondents whose organizations have undertaken a large scale IT claims initiative in the past three years than for those who have not This suggests that past investments may not deliver what is needed in these areas About this report More efficient interaction with external suppliers and third parties is a top priority to help reduce rising claims settlement costs Almost one-quarter of respondents feel that inefficiencies in dealing with external suppliers in the claims process is contributing to rising claims settlement costs Also, improved connectivity with third-party suppliers was cited by almost one-third of respondents as an important way in which to increase the efficiency and effectiveness of the claims processing function Efficient interaction with external suppliers and third parties, such as brokers and loss adjusters, is the second priority area for change of claims operations insurers This is particularly true in the UK, Germany and Spain Furthermore, better data exchange with third-party suppliers is seen as the most important outcome or driver when investing in new claims management technology for 75% of respondents from Spain and 50% from Italy ►► A survey of 100 senior executives at non-life or composite insurance companies, in either the claims or IT function, with an even spread across the UK, France, Germany, Italy and Spain Delivering results through claims technologies is an Ernst & Young report, written by the Economist Intelligence Unit It examines the many pressures on claims management functions today and assesses how insurers are responding to new and emerging issues in the claims environment, particularly with technology solutions For this research, we contacted 78 different insurance companies ranging from those with annual revenue above €5b (16%) to smaller operations with revenues of €100m–€300m (22%) The report draws on two sources of original research conducted during September and October 2011 by the Economist Intelligence Unit These two strands of research provide important insight into the drivers of change in claims management, as well as the strategic responses of insurers in choosing technology solutions: ►► In-depth interviews with the head of claims or CIOs at 20 insurance companies in the UK, France, Germany, Italy and Spain Delivering results through claims technologies How well insurers are prioritizing investment in claims technology What’s driving change in claims management Change has been one of the few constants for insurers in recent years It is driven by a variety of factors, from the need to address claims leakage and remain one step ahead of the fraudsters, to achieving operational efficiencies while meeting diverse and changing customer requirements In the past, the insurance industry has been dogged by stereotypes and accusations of poor customer service But it is clear that insurers are keen to put this behind them Speak to most insurers and they will tell you that the customer experience is a top priority and that the customer is at the center of many of the changes currently taking place in claims management A huge 65% of UK respondents and 40% of those in Germany pointed to “customer expectations of speed and efficiency” as the main factor driving change in claims management across the insurance industry What are the main factors driving change in claims management across the insurance industry? Customer expectations on speed and efficiency 30% 30% Increasing claims volumes 20% 20% 40% 25% 25% 40% 25% 25% The need to achieve operational efficiencies 35% 10% 35% 20% Claims leakage 35% 30% 40% 25% Data management (access, quality and security) 45% 25% 25% 20% Increasing claims settlement costs 25% 25% 20% 10% Existing system constraints 10% 10% 0% Regulatory requirements 0% Innovations in claims technology 5% 10% 40% 30% 40% 50% 20% 20% 20% 10% 0% 15% 45% 25% 25% Better fraud management 65% 40% 35% 30% 20% 20% 40% 20% UK Germany 60% France 80% Italy 100% Spain Source: Economist Intelligence Unit for Ernst & Young Note: Percentages not add up to 100% as respondents could select more than one option Certainly, insurers are increasingly keen to respond to the developing needs of their customers Graham Gibson, Director of Claims for Allianz UK, asserts: “We have spent a huge amount of time and effort understanding what the customer needs and then aligning our processes accordingly.” Delivering results through claims technologies How well insurers are prioritizing investment in claims technology A common observation among claims professionals is that customers have become more demanding — and insurers are keen to satisfy them As Peter Albrecht, Head of Claims at ACE European, emphasizes: “Claims is the moment of truth in the insurance industry Here, we have the chance to deliver what we’ve promised.” Rising claims settlement costs are also keeping insurers up at night In the survey, 40% of respondents in Spain, as well as 25% of respondents from Italy, the UK and France identified this as a main driver of change The motor insurance segment continues to suffer from insurance fraud, with “crash for cash” staged accidents and fraudulent whiplash claims adding significantly to the costs of claims Motor insurers are not alone in having to address the thorny issue of fraudulent claims In the survey, while a wide variety of issues were identified as contributing to rising claims settlement costs, the highest percentage of respondents identified claims fraud Furthermore, a significant 50% of respondents in Spain and 40% of those in Italy identified “better fraud management” as one of the main reasons behind improvements to claims management Imran Ahmed Partner, Ernst & Young LLP (UK) EMEIA Claims Advisory Leader “In a market where top line revenue is under considerable pressure in both Personal and Commercial lines, and claims costs continue to escalate, trying to effect change in claims can have a material impact on the bottom line Many of the claims drivers highlighted are particular to certain countries However, across Europe we are seeing an increasing trend for injury claims; fraud continues to be an increased focus area; and the ongoing challenges with claims leakage are not receding The specific challenge for many insurers is how to bring about change in a sustainable way — typically process and organizational changes will have limited impact without the support of technology.” What is your sourcing strategy for developing your claims technology? We are recruiting to bring new skills in house to support our development plan 40% 37% 6% 35% We already have the in-house capabilities to run our planned claims IT investment program 5% We expect to utilize external companies to provide technology development capability 0% 11% 47% 60% 42% 40% 42% 71% 20% 21% 24% 40% 20% UK Germany 60% France 80% Italy 100% Spain Source: Economist Intelligence Unit for Ernst & Young The answer may lie in the amount of customization insurers plan for the tools they purchase Whether they have undertaken a large-scale claims initiative in the past three years, the investment plans insurers are making for the next three years require customization or adaptation Only 2% of respondents said they would be able to buy an offthe-shelf package and use it with minimal customization Paul Sparkes Partner, Ernst & Young LLP (UK) EMEIA IT Advisory “While there are few big surprises here in how claims leaders are moving away from bespoke systems to tailored packages — mostly resulting from the evolution of high quality solutions — what we see as interesting is the consensus across European insurers on the challenges they face in trying to implement the solutions within their own organizations Three factors are clear and consistent issues: data migration, embedding business change, and maintaining that change in the process Our view is that managing scope is one of the biggest challenges — defining how much process specification and diversity people need within their systems Many firms are customizing packages extensively from native functionality which will create upgrade challenges in the future in terms of maintaining the integrity of their selected package based solution Tailoring packages also requires different IT skills to building a bespoke system.” 32 Insurers interviewed for this report focus on the flexibility of this approach Allianz’s Mr Gibson observes: “The main advantage is certainly around flexibility And if we want to something that is either extremely complex or if we need to a very big build very quickly, then the right expertise can be brought in So you are managing the day-to-day and you are outsourcing the complexity or volume in terms of IT build.” Dr Riccardo Gamba, Technical Risk Manager at RSA Italy, says his company runs IT processes in-house “In 2007–08 RSA Italy went through a deep analysis of IT strategy, considering potential outsourcing of IT processes,” he says “In a nutshell, the outcome was that, owing to the size of the operation, the potential benefits coming from full outsourcing are not enough to justify this decision But some minor activities have been outsourced like the management of hardware and other non-core activities like management of anomalies.” LV=’s Mr Milliner identifies continuity as another benefit of the in-house approach “If you want to upgrade, or if you want to further development, you have the people in your organization who can maintain that system and carry on its evolution,” he says “Your system is not just a nice new present, you need to have the people and the resources in place to manage it.” Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 33 Realizing the benefits of new technology There is a concern over whether insurers are fully realizing the benefits of new claims management technology In particular, there appears to be a disconnect between what they say are priorities and where they actually invest For example, 40% of survey respondents pointed to “customer expectations of speed and efficiency” as one of the main factors driving change in claims management across the insurance industry Increased customer satisfaction is also considered a top three driver when investing in claims management technology However, customer and claimant management was only selected by one quarter of respondents as an area of claims operations that they are currently prioritizing for change, and less than one-fifth of respondents are investing in tools to assist with customer interactions This last point is particularly important, as the survey shows that insurers expect a significant increase in customer expectations of using mobile devices or apps and social media to communicate during the claims process in the next five years, meaning insurers must be prepared to interact with customers through a variety of channels Zurich’s Mr Tarradellas has recognized this need and in the past 12 months has begun piloting initiatives to expand the channels through which customers can communicate “It is now in a period of change, especially related to communications through new devices like the iPad, iPod, and so-on, also related to social networks like Facebook and Twitter All of this is new in Spain: there is a real boom here now,” he says “We have to invest in and adapt our software to these devices for customers to be able to, for example, report their claims directly from their iPhone, attaching a photograph of the damages.” 34 Once insurers decide which areas to prioritize for change, in technology solutions to invest in and how to implement those investments, they also need to demonstrate that they have successfully implemented and are realizing the benefits of their investments Survey respondents say that the ability to quantify and prove investment decisions is the top obstacle to implementing successfully and realizing the benefits from new claims management technology Unsurprisingly, respondents who have undertaken a large-scale claims initiative in the past three years were much more likely than those who have not to say that the ability to quantify and prove investment benefits is the main obstacle Maintaining the momentum of a multi-year major change program and decommissioning old systems conclude their top three obstacles Imran Ahmed Partner, Ernst & Young LLP (UK) EMEIA Claims Advisory Leader ”Insurers often underestimate the amount of change required to implement successfully a claims solution Most claims platform replacements are significant and complex undertakings from a technical point of view with package configuration, data migration, and rules definition being part of the mix An area that is often overlooked is the approach to dealing with the people change For example, many of the new claims technologies may be replacing ‘green screen’ systems with modern MS Windows based interfaces — the types of process control being exercised may well be different This can have the impact of creating uncertainty and challenge for the user community A failure to deal with this effectively can impact user adoption and therefore the realization of benefits.” Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 35 The perceived obstacles to implementing successfully and realizing the benefits of new claims management technology differ widely from country to country For example, 40% of UK respondents pointed to “decommissioning old systems”, but this concerned only 5% of Spanish respondents In Germany, nobody saw “delivering the business change necessary for the technological change” as a major obstacle; in contrast 35% of those in Spain did Furthermore, 55% of Italian respondents pointed to the problem of data migration, while that concerned only 25% of the French One-quarter of those in Germany and in France were worried about the ability of the organization to absorb change, but only 5% of respondents in Spain viewed this as a major cause for concern Harald Neugebaur, Head of Claims, Non-life, and Senior Vice-President for Gothaer Versicherung, backs up the survey findings for Germany, stressing that delivering the business change necessary for the technological change can be a major obstacle He says that the crucial factors in overcoming implementation problems are: “Stringent project management, testing and last, but not least, good training and mentoring of staff.” What are the major obstacles you see to implementing successfully and realizing the benefits from new claims management technology? Ability to quantify and prove investment benefits 40% 15% 45% 15% Maintaining the momentum of a multi-year major change program 35% 10% 10% 40% 15% Decommissioning old systems 55% 40% 25% 25% 25% 5% Data migration 25% 30% 35% 55% 30% 20% Challenges of integrating new technologies to existing systems 25% 25% 20% Ability of the organization to absorb change 5% 15% 40% 30% 25% 25% 15% Delivering the required functionality 5% 20% 20% Budget restraints 5% Lack of available implementation skills Delivering the business change necessary for the technology change Other, please specify 35% 5% 5% 20% 35% 0% 0% 0% 0% 0% 0% 40% 20% UK Germany Source: Economist Intelligence Unit for Ernst & Young 36 70% 25% 25% 15% 15% 0% 40% 25% 15% 15% 60% France 80% Italy Spain 100% Claims professionals also identify wider issues of concern during the implementation process A common issue cited for pan-European and multi-national companies, for example, is the challenge of integrating an IT system globally There is a view that the larger the organization, the more difficult it is to set up one consistent system Historically, the timescales involved in implementing new solutions or the level of training required for claims handlers would have caused particular concern While these are still important considerations, there is some recognition that modern technologies are usually deployed more speedily now, and that systems tend to be sufficiently user-friendly for claims handlers to adapt to them more quickly However, that is not to say that modern change programs can be achieved effortlessly Presented with new systems and often significant transformations in processes, claims handlers will undoubtedly require support and training in order to adapt (see: “Supporting claims handlers with technology”) ACE European’s Mr Albrecht asserts: “From my point of view, the challenges lie in training people and helping them to adapt to the new system in terms of their hearts and their minds It is a fundamental change.” Generali’s Mr Stoffels agrees: “One of the larger problems is that if you implement new technology or processes, it is up to the claims handler to handle them And it’s not necessarily easy to train more than a thousand people to accept the process and to learn how to use new technology It requires a lot of communication and training.” Asked about the inherent difficulties in implementing new systems, Jörg Fey, head of IT co-ordination property and liability insurance for Ergo, points out that: “If a new software/ program/technology does not provide obvious advantages to the user (that is, the claimshandling agent) in advance, it is difficult to get him/her to accept it.” Mr Fey also puts forward the view that: “When implementing new claims processing technology, those elements of process optimization involving service providers present the greatest challenge We therefore place particular emphasis on early joint coordination of necessary activities and ensure the necessary quality by means of intensive end-to-end tests.” Nicole Michaels Principal, Ernst & Young LLP (US) ”Performing core systems claims transformation is second only to policy in terms of the costs and risks associated Even with leading edge packaged software available in the marketplace scope creep, legacy systems integration and large-scale conversions can still derail and drive up the cost of an implementation costing a program multiples of planned spend and lasting for several years.” Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 37 Given the many challenges to overcome when introducing new technology, it is clearly important for claims leaders to their homework before embarking on a program of change So what types of operational analysis are typically undertaken to support investment decisions in claims technology? Reviews of claimant and employee satisfaction appear to be high on the agenda In addition, a market or competitor review of claims technology initiatives emerged as a priority for those surveyed in Italy and Spain The survey showed evidence of diverse priorities Notably, the Six Sigma process review was highlighted by 60% of UK respondents, but only 5% of those in Spain What operational analysis you typically undertake to support your investment decisions in claims technology? 30% Six Sigma process review 25% 5% 30% Claims leakage review 20% 60% 35% 35% 30% 20% 30% 30% Expense analysis 5% 55% 10% 25% Review of employee satisfaction 30% 45% 45% 25% Lean process review 20% 5% 35% 25% 25% Review of claimant satisfaction 35% Review of supplier performance 5% 10% 55% 40% 45% 25% 15% 15% 20% Market or competitor review of claims technology initiatives 55% 25% 30% 20% 55% 55% 30% Productivity review/activity analysis 55% 30% 45% 0% 0% Other, please specify 0% 0% 0% 0% 40% 20% UK Germany 60% France 80% Italy 100% Spain Source: Economist Intelligence Unit for Ernst & Young Note: Percentages not add up to 100% as respondents could select more than one option There is also pressure to see the benefits of IT investment fairly quickly Most survey respondents believe they should be able to see a return on investment from a claims IT investment within three years The Spanish proved to be the most demanding, with 40% of respondents expecting to see a return within a year 38 Dave Hollander Principal, Ernst & Young LLP (US) Global Insurance Advisory Leader “While claims may provide a ‘target rich environment’ for improving claim outcomes, reducing expenses and improving customer service, the value of an endorsed business case should not be underestimated While an ROI of three to five years is a common expectation, investment and resource fatigue commonly plague these projects A thorough, signed-off and monitored business case is critical to ongoing corporate support of one of the most significant IT investments an insurer will make.” How soon you expect to see a return on investment from your claims IT investment? 60% Within three years 60% 45% Three years+ Within six months 5% 10% 10% 15% 10% 0% 0% 0% 0% 0% 0% Within one year We are not currently investing 85% 65% 20% 0% 0% 0% 0% Our investment is motivated by 0% other benefits rather than a return 0% 0% on investment (e.g., meeting regulatory requirements) 0% 25% 30% 40% 5% 5% 10% 40% 20% UK Germany 60% France 80% Italy 100% Spain Source: Economist Intelligence Unit for Ernst & Young Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 39 Spotlight on Supporting claims handlers with technology The question of how technology supports claims handlers can be a contentious one, with insurers keen to emphasise that IT is there to enhance, rather than replace, people skills The message tends to be that, as insurers look to retain customers and staff, technology is to be viewed as an enabler, rather than a cost cutter Hiscox’s Mr Pinchin asserts: “For us, the intellectual capability of the claims handler is broadly more important than the system they use.” In fact, there is widespread consensus that, far from simply automating those all-important customer-facing jobs, technology solutions serve to free up claims handlers, allowing them more time to put their skills and experience to best use When investing in new systems, it is clearly important for insurers to be able to reassure their staff and their customers that human resources remain as important as ever LV=’s Mr Milliner explains: “One thing we don’t want is to suggest that technology is replacing the human element of the job or de-skilling the roles that they already have When we’ve gone about looking at the role of technology, it is there to enable our people to deliver better customer service and to support them in delivering a better overall result.” How technology is expected to support people working in the claims function at their organization differs from country to country For Italian and Spanish survey respondents, providing access to data emerged as particularly important, while those in the UK and Germany were keener to highlight the issue of performance management There was some consensus that providing access to documents is a significant issue, with 45% of French and Spanish respondents, 40% of Italian and 25% of German and UK respondents selecting this option Imran Ahmed Partner, Ernst & Young LLP (UK) EMEIA Claims Advisory Leader Dave Hollander Principal, Ernst & Young LLP (US) Global Insurance Advisory Leader “I see the same in the US — all too often claims technology today is either fairly antiquated or represented by a series of disparate systems Claims professionals are multi-talented and highly skilled individuals that should be using their abilities to better serve the customer and fairly manage the claim in appropriate time frames Their time is too frequently spent digging for the meaningful information and coping with decoupled and diverse technologies.” 40 “Claims handlers are on the whole served poorly by technology I personally have sat with handlers in a range of companies in their contact centers to see what they have to contend with on a day-to-day basis Sadly, for too many, this often involves dextrous toggling between multiple systems to read and input data, scribbling on pieces of paper and at the same time holding a lucid conversation with the customer! It is no wonder that the improvement that modern technology offers is so highly prized by claims practitioners themselves.” How you expect technology to support people working in the claims function at your organization? Providing a structured process for staff to follow 45% 15% 25% 0% 30% 40% Performance management 25% 25% 25% To be flexible enough to the way claims staff work 35% 25% 5% 5% 5% To enable better management oversight of activity (performance and regulatory) 30% 30% 30% 15% 15% 25% 15% Improving communications between staff 15% 20% 20% Improving communications between staff and clients 25% 25% 25% 30% 30% 25% 25% Providing access to documents 40% To assist them in making skilled decisions 20% 10% 15% 20% 15% Providing access to data 20% 5% 10% 0% Capacity management 5% 5% 5% 45% 20% 10% Supporting training 45% 20% 20% 5% To enable a reduction in the number of staff involved in the process 45% 25% 25% 50% 80% 20% 40% 55% 10% 0% 0% Other, please specify 0% 0% 0% 0% 40% 20% UK Germany 60% France 80% Italy 100% Spain Source: Economist Intelligence Unit for Ernst & Young Note: Percentages not add up to 100% as respondents could select more than one option Other areas of technological support recognized by survey respondents included improving communications with staff, supporting training, providing a structured process for staff to follow and enabling better management oversight of activity (performance and regulatory) Asked for practical examples regarding the way in which claims handlers are supported by technology on a day-to-day basis, Ecclesiastical’s Mr Bonehill points to the facility to prioritize workloads He explains that the diary function in particular ensures that the relevant files are brought into the claims handler’s in-box on a pre-determined date “This kind of diary function is key because you really need to be proactive We always need to be on the front foot with claims because the longer the claim is outstanding, the more expensive it is, particularly in the liability arena.” Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 41 Conclusion Claims management operations are under pressure from a diverse set of challenges from headline-grabbing extreme weather events to the ongoing battle against fraud Claims leaders also need to juggle the often contradictory objectives of meeting increasing customer demands and achieving cost and time efficiencies It is hardly surprising that in the search to develop and update claims management functions, there continues to be a challenge to prioritize time and resources Insurers appear to be well aware of the need for ongoing investment in claims management technology and of the potential business benefits In particular, they are focused on the need for better data management, and to improve their interaction with external suppliers and third parties But, while insurers recognize that customer expectations are evolving, and say that customer satisfaction is an important objective when investing in claims technology, they are not necessarily following through by investing in solutions in this area A shift has been seen in the way in which insurers are approaching investment in claims technology Insurers are switching from bespoke systems to buying technology tools and adapting them, or enhancing or re-platforming an existing system A large number of insurers are recruiting new skills in-house to support their development plans — an indication of the level of adaptation and customization planned for the technology solutions that will be purchased over the next three years While insurers recognize that they must continue investing in order to keep pace, and say that they are investing sufficiently, the question remains whether they are spending in the right areas, on the right tools and in the right manner to make the most of their investments Insurers must not only identify the issues driving change in claims management across the industry, but also the key priorities within their own businesses, before assessing their current systems, considering where improvement is needed and weighing up the solutions on offer 42 Some final thoughts from Ernst & Young A number of organizations are in the process of investing or planning to invest in claims technology to improve their performance Given the changing expectations of today’s customers, insurers need to ensure their investment does not become the legacy burden of tomorrow As part of the investment in technology clients should think particularly hard about the approach to data management and how this is addressed through the same implementation program Subsequent technology investments in data analytics and reporting software are clearly possible; however, an integrated approach for many will be the right answer Our experience from working with clients highlights that, for many, a package or tool customization is the route to go down Yet there are some key lessons: ensure you manage requirements tightly or the implementation effort can grow rapidly and you can be left with a system that cannot then be easily upgraded, ensure as an organization you have the right skills to deliver the program, and focus on where you can get greatest return on investment The next few years are likely to see a step change in the claims operational landscape through the investments in technology There is typically only one chance to get it right — make sure you focus on the right levers for your business and your customers Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 43 Ernst & Young — a leading advisor in claims management A clearly articulated claims strategy should be at the heart of any insurance company intent on attracting and retaining customers and growing and maintaining a profitable business Successful claims management is led from the top of an organization and reflected in the operational architecture, the underpinning business and technology capabilities and how these deliver the customer experience Ernst & Young’s global financial services team works without boundaries between people, disciplines and geographies We can work with you to deliver a range of services to address your business issues: Claims strategy and business design: ►► Leading the setting of a claims strategy and philosophy aligned to your business goals ►► “Health-checking” your claims operation, evaluating its current state against future required capabilities ►► Designing the claims target operating model by defining how required capabilities will be delivered through people, processes, governance and technology ►► Improve the effectiveness of their operations through leakage analysis and supply chain Claims technologies and IT advisory: Claims transformation: ►► Improving efficiency, effectiveness and customer service through claims technology ►► Helping execute a claims transformation agenda to meet your goals ►► Providing impartial advice on the right solutions for your business ►► Building a business case and executing change while realizing and tracking benefit delivery ►► Enhancing or replacing current technology platforms Claims data analytics: ►► Improving data quality as a basis for informed decision-making ►► Enhancing the quality of claims management information ►► Enhancing data analytics in support of the business ►► Design and implementation of specific claims analytics to address issues such as fraud For full details, please visit www.ey.com/insurance-claims 44 Contacts Please get in touch with the people below or your usual Ernst & Young contact should you have any questions France Spain US Laurent Corbineau Manuel Martinez Pedraza David Connolly +33 14 693 7727 laurent.corbineau@fr.ey.com +34 91 572 7298 manuel.martinezpedraza@es.ey.com +1 65 0802 4508 david.connolly@ey.com Germany Andreas Freiling +49 6196 9961 2587 andreas.freiling@de.ey.com Italy Francisco de Borja Tornos + 34 91 572 7444 franciscodeborja.tornosrodriguez@es.ey.com UK Imran Ahmed Stefano Bellandi + 44 (0)20 7951 1882 iahmed1@uk.ey.com +39 028 066 9782 stefano.bellandi@it.ey.com Paul Sparkes Netherlands +44 (0)20 7951 4971 psparkes@uk.ey.com Niek de Jager Tony Sault +31 88 407 3879 niek.de.jager@nl.ey.com +44 (0)20 7951 5836 tsault@uk.ey.com Delivering results through claims technologies How well insurers are prioritizing investment in claims technology David Hollander +1 21 5448 5756 david.hollander@ey.com Nicole Michaels +1 61 2371 6772 nicole.michaels@ey.com 45 Ernst & Young Assurance | Tax | Transactions | Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality We make a difference by helping our people, our clients and our wider communities achieve their potential Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients For more information about our organization, please visit www.ey.com © 2011 EYGM Limited All Rights Reserved EYG No CQ0021 www.ey.com/insurance-claims In line with Ernst & Young’s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content This publication contains information in summary form and is therefore intended for general guidance only It is not intended to be a substitute for detailed research or the exercise of professional judgment Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication On any specific matter, reference should be made to the appropriate advisor The views of third parties set out in this publication are not necessarily the views of the global Ernst & Young organization or its member firms Moreover, the views should be seen in the context of the time they were expressed 11/2011 Artwork by EMEIA MAS [...]... are status chasing Reducing these alone, by investing in technologies that enable customers to track the status of their claim, could make a material difference to the claims servicing cost base.” Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 27 Approaches to investment in claims technology Insurers are certain that their planned technology. .. documentation management Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 21 Some insurers are investing in both core systems and complementary software, recognizing that this is necessary to achieve the desired level of data management Martin Milliner, Technical Claims Director at LV=, points to the insurer’s recent investment in the Guidewire... to build a bespoke system Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 31 What is your sourcing strategy for developing your claims technology? We are recruiting to bring new skills in house to support our development plan 40% 37% 6% 35% We already have the in- house capabilities to run our planned claims IT investment program 5% We... and generating better management information are important drivers when investing in new claims processing technology One inference is that those who have recently invested are finding that their new technology is not providing the solutions they need in this area Those respondents are more likely to say that they are considering investing in additional reporting software, analytics software and documentation... for respondents in Italy and the UK Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 9 What are the major challenges in claims fraud detection? Use of anti-fraud technology risks “criminalizing” customers (dealing with a high number of false positives) 55% 10% Lack of knowledge regarding the most suitable counter-fraud technologies 25%... could select more than one Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 13 The question is: how can insurers address the many and varied demands of their customers? The answer lies in a careful balance of skilled, experienced claims handlers and effective technology solutions QBE’s Ms Irigoyen defines good claims experience as: “A quick... who can maintain that system and carry on its evolution,” he says “Your system is not just a nice new present, you need to have the people and the resources in place to manage it.” Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 33 Realizing the benefits of new technology There is a concern over whether insurers are fully realizing the... service that is in line with our standards We already have systems in place to do this, but these could still be improved and that would certainly be a useful development for us.” Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 15 Claims tracking attracts mixed views from claims leaders, but is largely seen as an emerging trend that they... which insurers implement new technology But the survey finds a marked shift in the way in which insurers are approaching their investments in claims technology Around one third (32%) of insurers say that in the past three years their main approach to IT investment has been building a bespoke system However, over the next three years, insurers say they are more likely to buy a technology tool and adapt... Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 25 What are the benefits of using technology to work with third party suppliers? 75% 25% Reduction in claim lifecycle 35% 35% 20% 40% 20% Reduction in claims costs 20% 40% 40% Positive impact on ability to tackle fraud 20% 10% 25% Improve accuracy of information (e.g., more accurate indemnity ... How well insurers are prioritizing investment in claims technology 27 Approaches to investment in claims technology Insurers are certain that their planned technology investments will prepare... results through claims technologies How well insurers are prioritizing investment in claims technology 21 Some insurers are investing in both core systems and complementary software, recognizing... Delivering results through claims technologies How well insurers are prioritizing investment in claims technology 31 What is your sourcing strategy for developing your claims technology? We are